Ouch- ORIG beats on revenue (in my opinion) but really missed on earnings. They aren't going to improve if the gross margins will be this bad... This is bad news for DRYS imo:
They have debt issues. Unlikely that they will do either until the net income turns positive. The one good thing is that 56.8M is a non-cash D&A expense, so technically they "made" 41c this quarter. Even with that factored in, interest coverage is only 1.67x....
Essentially they have $54M per quarter play with. That's $216M per year. With debt at 2.64B, that's 12 years to amortize with no dividends, no investment in future growth, no repurchases, nothing.
Not a healthy sign. They need to cut expenses if they want to convince investors to stay. You can point to the new vessels-- sure, but they don't come online until July-November of next year. Along with these new vessels comes $1.29B of additional debt.
To be completely fair, the $726M that's funded for the newbuildings should be backed out of current debt. That leaves $1.91B or 72.5% of the total. A savings of 27.5% on i/r yields $8.89M more. This results in almost $63M/qtr-- $251.5M yearly -- 7.59 years to amortize the debt with zero-growth, zero-dividends, zero-buybacks.
I'd like to see a 10-year amortization schedule with less than 50% of the available cash being used. That's 72.5c currently or 29.4c EPS.
We're not there yet- avoid ORIG and if you're a DRYS shareholder pray that the market sees something positive in there.
I'm really perplexed by the operating expenses being so high. I'm not so worried about the debt as long as there is a reasonable explanation for the margins this quarter. On the upside, the new contract LOIs are very good news.
I expect some answers tomorrow. Consistent execution is key, and one hopes they can put their 1H challenges behind them.
The answers are previewed in the press release. Basically, there was still some delivery expenses and not full utilization. As debt levels decrease, i/r expense will go slightly down until delivery in 2013, at which point debt goes back up.
Consistent execution is the problem the ORIG has. With PACD's current valuation, ORIG would be $22+ if they could get their stuff together.
$145m in operating expense which does not include depreciation, on $263m of revenue in a quarter where the revenue efficiency was clearly better than Q1 - that's OpEx at 55% of sales before G&A costs (which fortunately did not increase QoQ). This drove 38% EBITDA margins in the quarter, definitely below target.
Looking forward to a reasonable explanation tomorrow. It is promising that they will be able to lock in 3-yr contracts on two of the newbuild rigs next year assuming LOIs turn into contracts.
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Essentially they have $54M per quarter play with. That's $216M per year. With debt at 2.64B, that's 12 years to amortize with no dividends, no investment in future growth, no repurchases, nothing.
Not a healthy sign. They need to cut expenses if they want to convince investors to stay. You can point to the new vessels-- sure, but they don't come online until July-November of next year. Along with these new vessels comes $1.29B of additional debt.
To be completely fair, the $726M that's funded for the newbuildings should be backed out of current debt. That leaves $1.91B or 72.5% of the total. A savings of 27.5% on i/r yields $8.89M more. This results in almost $63M/qtr-- $251.5M yearly -- 7.59 years to amortize the debt with zero-growth, zero-dividends, zero-buybacks.
I'd like to see a 10-year amortization schedule with less than 50% of the available cash being used. That's 72.5c currently or 29.4c EPS.
We're not there yet- avoid ORIG and if you're a DRYS shareholder pray that the market sees something positive in there.
I expect some answers tomorrow. Consistent execution is key, and one hopes they can put their 1H challenges behind them.
Consistent execution is the problem the ORIG has. With PACD's current valuation, ORIG would be $22+ if they could get their stuff together.
Looking forward to a reasonable explanation tomorrow. It is promising that they will be able to lock in 3-yr contracts on two of the newbuild rigs next year assuming LOIs turn into contracts.